Management Information System
Semester – VI
Submitted To: Prof. Manojpal
Submitted By: Ashlesha Bhagwat (227314)
Akanksha Khargharia (227305)
Submitted On: 26th December 2024
Nirma University
Institute of Management
Integrated BBA-MBA
2022-27
Question 1: What are the current issues facing Starbucks?
Starbucks is currently confronting a complex array of challenges that have significantly
impacted its market position and financial performance. The company's aggressive expansion
has resulted in store saturation within the United States, where over 16,000 locations are now
competing for the same customer base, leading to self-cannibalization. This has manifested in
a troubling 10% decrease in store traffic and a 7% decline in same-store sales. The financial
implications are evident in their Q3 2024 results, with net sales dropping to $9.1 billion,
marking a 3% year-over-year decline, while operating margins have contracted from 18.7%
in 2019 to 11.3% in 2024. Rising operational costs, including increased wages targeting $17
per hour average, higher rent, and supply chain expenses, have further strained profitability.
The company's market position has also weakened considerably. Competition has intensified
from both premium coffee chains like Blue Bottle and Stumptown, as well as value-oriented
alternatives such as McDonald's McCafé and Dunkin'. This competitive pressure has eroded
Starbucks' premium brand positioning, particularly among younger demographics seeking
either more authentic experiences or more affordable options. The situation is further
complicated by menu complexity, with customers reporting confusion over too many options
and limited-time offers. International expansion challenges, particularly in China where
Starbucks operates 6,500 stores, have added another layer of uncertainty due to slowing
economic growth and unpredictable consumer behavior.
Question 2: What IT tools are possibly effective to improve or tackle the issues?
To address these challenges, Starbucks could implement several sophisticated IT solutions
that target both operational efficiency and customer experience enhancement. A
comprehensive AI-powered analytics platform could revolutionize customer engagement by
enabling real-time tracking of customer behavior and preferences. This system would
facilitate personalized recommendations, dynamic pricing optimization, and predictive
analytics for customer preferences, potentially increasing customer engagement by 25% and
improving satisfaction rates by 15%. The platform could also integrate with an enhanced
mobile application featuring smart order customization, accurate wait time predictions, and a
gamified loyalty program, which could reduce wait times by 30% and increase mobile order
frequency by 40%.
Operational efficiency could be dramatically improved through the implementation of a smart
inventory management system incorporating real-time tracking, automated reordering, and
waste reduction analytics. This solution could potentially reduce inventory costs by 20% and
decrease waste by 30%. Advanced workforce optimization tools utilizing AI-driven
scheduling and performance analytics could help reduce labor costs by 15% while improving
staff productivity by 25%. A comprehensive business intelligence dashboard would enable
real-time monitoring of sales, store performance comparisons, and market trend analysis,
leading to 40% faster decision-making and 30% improvement in forecast accuracy.
3. What is your group's description of the adoption of tools?
Adopting IT tools should be approached strategically and in phases. Initially, Starbucks
should enhance its mobile app and implement CRM systems to reconnect with customers and
boost satisfaction. The company can improve supply chain management to address
operational inefficiencies in the medium term. In the long term, sustainability tracking tools
and upgraded POS systems can align with broader company goals of environmental
responsibility and enhanced customer engagement. These steps will allow Starbucks to tackle
its current issues effectively while positioning the brand for sustainable growth in the future.
